Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Tom Keene along
Speaker 2: with Paul Sweeney. Join us each day for insight from
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Speaker 2: or anywhere else you listen and always I'm Bloomberg Radio,
Speaker 2: the Bloomberg Terminal, and the Bloomberg Business App. Jeffrey Rosenberg
Speaker 2: joins us now with Blackrock, and it's not in a
Speaker 2: FED day. We're all lathering about the FED, so Jeff,
Speaker 2: we're not going there right now. Jeff, what are you
Speaker 2: doing in a system system systematic bond portfolio, a mixed
Speaker 2: multisector bond portfolio when spreads are priced to perfection? What
Speaker 2: does your action plan is? Do you adjust into the
Speaker 2: second half?
Speaker 3: Yeah, it's a great question, Tom, because you know, spreads
Speaker 3: are not particularly attractive. You know, we're at or through
Speaker 3: mid cycle tights, so there's not a lot of kind
Speaker 3: of anticipation of price performance from spread compression here and
Speaker 3: so generally it's a more defensive positioning because you've got
Speaker 3: more downside than upside. But your upside is basically the carry,
Speaker 3: and the carry is attractive mostly for the total yield,
Speaker 3: less for the spread. You know, So we've been allocating
Speaker 3: you know, less than we would otherwise be to the
Speaker 3: lower end of high yield. There's a bit of a
Speaker 3: different story there, and a bifurcation, really big bifurcation kind
Speaker 3: of mirrors the bifurcation that we see between say, you know,
Speaker 3: small caps large caps in the equity world, and that
Speaker 3: bifurcation is kind of double be's to triple c's. That's
Speaker 3: where you really see a very different part.
Speaker 2: Of the market.
Speaker 3: So you got to play a lot more defense in
Speaker 3: that part of the market. It is pricing appropriately for
Speaker 3: the default risk aggregate. The default risks are very low,
Speaker 3: so we feel pretty good about the spread exposure that
Speaker 3: we're taking. We think you can take that spread exposure.
Speaker 3: But again you got to think about that as as
Speaker 3: carry and not price appreciation.
Speaker 2: Paul Sween the here it is the Bloomberg Total Return Fund,
Speaker 2: the old Lehman Index, Bloomberg has it now. It's definitive
Speaker 2: a breakout price up, yield down. I got a little
Speaker 2: better price performance and the total return index exactly.
Speaker 4: Tom Jeffery got his master's in computational financier.
Speaker 2: Curdie Curdie Melon.
Speaker 4: I mean, that's meth right.
Speaker 2: He sat there one day and he looked at Tepper
Speaker 2: and he said, should I go robots or Temper? And
Speaker 2: he went Temper. He went Tepperate.
Speaker 4: I mean, who doesn't computation finance MC Carnegie mellon way
Speaker 4: too much? Meth so, Jeffrey, Tom was calling out earlier
Speaker 4: today he noticed that the Home Depot comes to the
Speaker 4: market with a ten billion dollar debt offering. They had
Speaker 4: forty seven billion dollars in demand. Talk to us about
Speaker 4: the investment grade market. People are just dying to get
Speaker 4: paper and get yield. Is that kind of where you
Speaker 4: take away from a deal like Home Depot.
Speaker 2: Yeah.
Speaker 3: I mean if you look in the credit markets, and
Speaker 3: I talked about, you know, probably the weakest part of
Speaker 3: the public credit markets, which is kind of triple C
Speaker 3: part of high yield, But if you talk about investment grade,
Speaker 3: it's a very different story. And really again this mirrors
Speaker 3: this kind of small cap large cap story in terms
Speaker 3: of what company's interest rates sensitivity is. Right, A lot
Speaker 3: of questions about, you know, where is the bite of
Speaker 3: higher interest rates being felt, and it is really this
Speaker 3: kind of bifurcation that we're seeing, and the investment grade
Speaker 3: side is really well prepared and well positioned. Partly that
Speaker 3: was because we had such a long peer period of
Speaker 3: zero and low interest rates that allowed companies to really
Speaker 3: fortify their balance sheets extend debt maturities. Most of the
Speaker 3: investment grade cap stack is in fixed rate debt with
Speaker 3: long maturities, and so you're seeing very strong interest coverage
Speaker 3: performance even in an environment where you'd expect some degradation
Speaker 3: given the increase in interest rates, and there's just not
Speaker 3: that much rollover that's happening. So the fundamental side of
Speaker 3: investment grade credit risk is very supportive. You have a
Speaker 3: tremendous amount of demand and you haven't had an incentive
Speaker 3: and this is the first case in a very long time,
Speaker 3: you haven't had an incentive for issuers to kind of
Speaker 3: front run or front load I should say front load.
Speaker 3: They're refinancing. What they're doing is they're pushing it out
Speaker 3: obviously because the coupons that they have on their balance
Speaker 3: sheets are the lowest ones that they're going to have have,
Speaker 3: So it's reducing the amount of kind of rollover issuance
Speaker 3: that you would otherwise have. And so when you see
Speaker 3: these new issues come to market, there's just there's just
Speaker 3: a lot more demand for them. As you're highlighting in
Speaker 3: the some debot case.
Speaker 2: John Templeton years ago, there will be a shortage of bonds.
Speaker 2: You say, demands insane. Paul correctly brings up home depot
Speaker 2: where we had one hundred I can't remember now, we
Speaker 2: had like a one hundred and thirty seven b pick
Speaker 2: up in the forty year yield from what was expected,
Speaker 2: a lower yield, a more attractive return because of demand.
Speaker 2: Jeff Rosenberg, is there a shortage of bills, notes and bonds?
Speaker 3: Well, Tom, we got to be a little careful about
Speaker 3: about that, because you know, we're going to switch the
Speaker 3: lens from corporate issuance, where balance sheets have been you know, strengthened,
Speaker 3: they've extended debt maturities, they've been relatively conservative, specially on
Speaker 3: the investment grade side, and then flip the lens to
Speaker 3: the government side, US treasure issuance. We have a very
Speaker 3: different picture, and obviously that's the fiscal debate, the unsustainability
Speaker 3: of fiscal policy, the increasing amount that the private sector
Speaker 3: will have to fund that issuance, and the eventual raising
Speaker 3: of treasury coupon sizes you know, been hanging out kind
Speaker 3: of in bills here, But we're going to have some
Speaker 3: pressure eventually. We think that pressure will show up in
Speaker 3: the back end, and it's not going to be a
Speaker 3: case of too little supply. It's going to be a
Speaker 3: case of the markets having to digest ever increasing amounts
Speaker 3: of supply, and that we think, you know, is going
Speaker 3: to end up being a pricing story for the back
Speaker 3: end of the curve. So it's going to be a
Speaker 3: different story than what you're talking about here for the
Speaker 3: investment grade market.
Speaker 2: And Jeff, the next time you're on, I want to
Speaker 2: talk about medig Lean and Miller, who at your Carnegie
Speaker 2: Mellon invented how we think about capital structure. But just
Speaker 2: simply to say, are we going to see new corporate
Speaker 2: bondation wins like what home Depot did yesterday? Yes, this
Speaker 2: week looks like a thirty billion dollar week. Is one
Speaker 2: of the reports from Bloomberg.
Speaker 3: Yeah, I mean in terms of optimal debt structure. I think,
Speaker 3: you know, particularly again on the investment grade side, a
Speaker 3: lot of companies you know, got to the right point
Speaker 3: given the prior interest rate tax regime. Another thing that
Speaker 3: we're going to talk about here, you know, as we
Speaker 3: moved through the election and the fiscal policy debate is
Speaker 3: corporate taxes. And you know, it's the proper tax rate
Speaker 3: and the deductibility of interest, you know, and and and
Speaker 3: there were some changes in the tax code that limited
Speaker 3: the deductibility for highly leveraged firms. That changes the optimal
Speaker 3: default point. But for investment grade companies, as you see
Speaker 3: that tax rate goes up, you know, you may see
Speaker 3: you know, some more attractiveness in terms of issue ins
Speaker 3: and that can shift how much issuance we're getting.
Speaker 2: Are that tax we're out of Jeff Rosenberg never enough
Speaker 2: time with Blackrock, thank you. We have in the studios
Speaker 2: the number one voice and retail and we're gonna go
Speaker 2: to luxury because that's what's out there.
Speaker 4: And Tom another CJ.
Speaker 2: Lawrence, Yeah, I know, she's gifted. I mean, she's gifted.
Speaker 1: C J.
Speaker 2: Lawrence and all that. Dan, I'm gonna cut to the chase.
Speaker 2: The Lewis Viewton store at fifty seventh Street in Fifth
Speaker 2: Avenue is a gorgeous modern white glass store of windows
Speaker 2: that I can't afford our No wants to bulldoze it
Speaker 2: and build a new building. Five people have said why why?
Speaker 1: The reason why companies, especially luxury companies, reinvest because the
Speaker 1: ante keeps going up and you have to be able
Speaker 1: to give new experiences to that luxury consumers that they'll
Speaker 1: pay those dollars for those luxury items. Look what he's
Speaker 1: got across the street. He spent a fortune on Tiffany.
Speaker 1: The Louis Vuitton store hasn't been touched in years. Right,
Speaker 1: if he needs to be have another brand that is
Speaker 1: on the same part you have to invest.
Speaker 2: Is luxury the AI we don't talk about. I'm looking
Speaker 2: at Aermez's estimated forward pe. It comes down Paul to
Speaker 2: forty seven times earnings. I mean, help me here with
Speaker 2: the effervescence of the luxury business.
Speaker 1: Is it in Nvidia like it feels like it is
Speaker 1: for one reason, the creative products that they have, but
Speaker 1: the continued expanding customer base. Baby boomers, one of the
Speaker 1: wealthiest generations, is passing down that wealth to millennials. You
Speaker 1: look at the Chinese consumer and see what's.
Speaker 2: China doing right now? It's a bloom bloom. I know
Speaker 2: you're the only one I know optimistic on.
Speaker 1: China now, not optimistic on it. You were still having
Speaker 1: very cautious trends out of China where the Chinese are spending,
Speaker 1: or within China or within other local Asia regions. Not
Speaker 1: seeing a return really to Europe. You're not seeing a
Speaker 1: return to the US.
Speaker 4: Yeah, I see that when I walk walk to Penn
Speaker 4: Station every day. I don't see them on Fifth anyone.
Speaker 2: So if you're gonna walk to Penn Station today to
Speaker 2: sit on this chair, you're are you taking this Korski home? Yeah?
Speaker 2: I might have to.
Speaker 4: I might be going to Hoboken today. Little problems with
Speaker 4: Penn Station here today, Dana, talk to us about the
Speaker 4: US consumer. Here, we got some retail sales numbers say
Speaker 4: a little bit weaker than forecast. Talk to us about
Speaker 4: I hear there's a bifurcation in the marketplace with the consumer.
Speaker 1: So overall I call the US consumer and today's numbers
Speaker 1: definitely highlight it squishy. We have a squishy US consumer,
Speaker 1: and frankly, it's every income level where we've seen a
Speaker 1: moderation and spend and we've seen that trade down. Look
Speaker 1: where the big sales increases are coming. Same store sales
Speaker 1: increases of better than three percent at the off pricers
Speaker 1: like TJX Ross Stores Burlington, they're getting the benefit of
Speaker 1: the trade down. And you take a look at the
Speaker 1: discounters they're getting that too. But overall, luxury sales are moderating.
Speaker 1: If you have newness and new trends, it's working.
Speaker 2: Tom.
Speaker 1: You're gonna like this wide leg denim jeans. The wider,
Speaker 1: the better, and that's the trend out there.
Speaker 4: Got better than skinny jeans.
Speaker 2: We go to surveillance, Fashion Icon and Lisa Mattel. Lisa,
Speaker 2: we're going to see you in wye jeans.
Speaker 5: Correct. I was told by my daughter that I am
Speaker 5: not cool because I wear skinny jeans. I have to
Speaker 5: go with the wide leg jeans in today.
Speaker 2: See what you learn on surveillance, rich make the single
Speaker 2: best idea with data and and and Lisa today, Paul continue,
Speaker 2: So if.
Speaker 4: I look at a Walmart, for example, what am I
Speaker 4: seeing at the Walmart basket? What's in a Walmart basket
Speaker 4: these days? Is it more essentials? Let's don't discretion.
Speaker 1: So think about what Walmart is. Nearly sixty percent of
Speaker 1: their business is grocery. Wow, so you're getting grocery in
Speaker 1: there plus the other merchandise, and it's a combination of both.
Speaker 1: And you're seeing consumers today, even with essentials, they're trading
Speaker 1: down to private label. I've heard about the pet stores recently.
Speaker 1: We're consumers for their pets. They're trading down to private
Speaker 1: label goods for their pets.
Speaker 2: Even we'll talk about single best idea, but I want
Speaker 2: to talk about the big money that everybody that follows
Speaker 2: surveillance follows with luxury. I remember, I think it was
Speaker 2: Laura Piano. It was like a billion dollar transaction. It
Speaker 2: changed the industry. This is years and years ago. Todds
Speaker 2: of Italy, which I would say is pretty conventional brand,
Speaker 2: spend over four hundred million dollars on a shoe brand
Speaker 2: nobody knows in America Roger Vivier. Explain why someone spent
Speaker 2: four hundred million dollars on a shoe that basically no
Speaker 2: one knows in America.
Speaker 1: Because what they see is the opportunity and acquire Roger Vivier.
Speaker 1: They feel that they have the creative talent to enhance
Speaker 1: the brand, open physical stores and distribution and make it
Speaker 1: a global brand. And they feel that their insights into
Speaker 1: the global customer will help drive that brand. When you
Speaker 1: think of brands that are smaller that where can you grow?
Speaker 1: I mean, I think one of LVMH's most significant transactions
Speaker 1: of the past few years has to be Tiffany. And
Speaker 1: look how they're reinventing.
Speaker 2: Is that working for them?
Speaker 1: Yes, they're getting more profit out of Tiffany. It's catering
Speaker 1: to a younger customer. Now they're modernizing and updating the
Speaker 1: stores and capturing a wider customer base.
Speaker 2: Tom Roger Vivier.
Speaker 4: It's on East sixtieth Street.
Speaker 5: Can go there and check it out today.
Speaker 2: Yes, she was there yesterday. It's why I brought it.
Speaker 2: Is it promotional right now? Now? I walked in the
Speaker 2: door and said, I'm saving you money? And is luxury
Speaker 2: promotional right now?
Speaker 5: Now?
Speaker 1: Inventory levels are lean for luxury. It's not promotional. The
Speaker 1: changes you have one of them raising prices like Chanelle.
Speaker 1: The others are holding and they're working on newness in
Speaker 1: order to drive demand.
Speaker 2: I don't have it in front of me. I'm sorry,
Speaker 2: I'm not brief done it but Dana Telsey, did Chanelle
Speaker 2: just throw somebody out on the street and they're going
Speaker 2: to bring in somebody new for design and all that looks.
Speaker 1: Like someone new is coming for over thirty years. No,
Speaker 1: it is not me.
Speaker 2: What does Chanelle need to do to recapture what they have?
Speaker 1: I mean, they're doing pretty well in terms of the
Speaker 1: gains they had, but I think overall the continued modernization
Speaker 1: and cut out the big price increases. They're not our mes. Yes,
Speaker 1: they're a luxury brand, but you can't go to the
Speaker 1: ilk of something.
Speaker 2: And Valentine and all the other outrageously expensive ones are
Speaker 2: all going to pull back prices.
Speaker 1: No, they're not pulling back prices. They're at the right level.
Speaker 1: Chanelle one higher than everybody else trying to capture a
Speaker 1: mez and our mez is in a different league than anybody.
Speaker 4: I didn't know that single best idea anybody talking to
Speaker 4: your clients about this the target.
Speaker 1: There's a couple that we're talking about Bathroom body Works
Speaker 1: and the inflection point to growth in the second half
Speaker 1: of the year. We're talking about t j X and
Speaker 1: the continued drum beat of increasing market share and increasing gains.
Speaker 1: We're talking about Costco because of the market share at gains.
Speaker 1: And we're also you know, we're talking about you talked
Speaker 1: about Denim Jean's, We're talking about Levi's.
Speaker 2: You're in San Francisco right now saying we got to
Speaker 2: go why jeans for Lisa Matail?
Speaker 1: Yeah, and it's working. Not only are they doing wide
Speaker 1: legs for Lisa, but take a look at their wholesale
Speaker 1: business where they've strengthened the distribution channels that they're going through.
Speaker 1: They're doing outfitting top to bottom with lifestyle, buy a
Speaker 1: shirt and buy the Janes, not just one, and they're
Speaker 1: capturing more of the women's customer.
Speaker 2: And finally, the miracle that is Abercranbrie and Fitch. Are
Speaker 2: you kidding me? How did they? I mean it's like GameStop?
Speaker 2: How did they do? And this is legit? How Dana
Speaker 2: Telsey over on Fifth Avenue they had Hunky Boy out
Speaker 2: in the street lined up. That all went away. Then
Speaker 2: what's happened doubled?
Speaker 1: Then what happened? Fran Horowitz came in as CEO she
Speaker 1: was there since twenty fourteen. Promoted to CEO. COVID gave
Speaker 1: her the time to assess data the store wasn't working.
Speaker 2: What do we do?
Speaker 1: She took a look at where she wanted her customer
Speaker 1: to be twenty five to thirty five? What do you
Speaker 1: need to give them? Outfits not items? Where do you
Speaker 1: need to sell it in stores that are inviting? Took
Speaker 1: away the fragrance, turned up the lights and now you
Speaker 1: can buy outfits and you wouldn't know it's the Abercrombie
Speaker 1: the past.
Speaker 2: One final question, No, no, I'm just amazed by one
Speaker 2: final question. I think it's supportant for our Boston audience,
Speaker 2: good morning, But across this nation? What is the pixie
Speaker 2: doest of TJX? How did they execute where so many
Speaker 2: others failed?
Speaker 3: You know what?
Speaker 1: They're people. They have the tenure of talent that have
Speaker 1: relationships with brands and merchants that they're able to assort
Speaker 1: the store better than others, capturing a wide price price assortment,
Speaker 1: capturing better brands and a value and opening compelling stores
Speaker 1: in great locations.
Speaker 2: What are the department stores that your heritage, your heart
Speaker 2: and soul is Bergdorf? Goodman?
Speaker 1: Is it?
Speaker 2: Is it around in five years?
Speaker 1: I think Bergdorf will be around in five years. I
Speaker 1: don't know who's going to own it. But I think
Speaker 1: it'll be around in five years.
Speaker 2: Do we still want to shop at department stores or
Speaker 2: we you know, is is Lisa going to be over
Speaker 2: at whatever? It's vivier today?
Speaker 1: You need new life to be breathed into the department
Speaker 1: stores because otherwise, what would you do?
Speaker 2: What would you do to your burg Lisa put the
Speaker 2: windows back on Fifth Avenue? That was Daylight, our original.
Speaker 1: On Fifth Avenue? Burgdorfs has What would you do to Burgdorf?
Speaker 1: I mean to Burgdorfs, I'd almost take a look at
Speaker 1: my customer base, invite them in capturing that younger customer base.
Speaker 1: Have events in the store and see what exclusives and
Speaker 1: limited collections designers can give so that you can only
Speaker 1: get it at Burgdorfs.
Speaker 2: Would I know by them.
Speaker 1: That's what it feels like. Would be the one look
Speaker 1: at lots of Mauritane in Paris. If you visit a
Speaker 1: lost of Mauritane in Paris, We're going to it's beautiful.
Speaker 2: Absolutely, We're taking the show to Paris in the fall.
Speaker 1: I'll join you.
Speaker 2: proNT right at the top of front on the old restaurant.
Speaker 5: Which is unning.
Speaker 1: Yes, it's done.
Speaker 2: Kill that. Don't use clothes. I mean, all the kids, Lisa,
Speaker 2: they want to go to you. They don't want to
Speaker 2: go to or whatever. They want to go to hand
Speaker 2: me down store.
Speaker 5: The consignment shops because you can get the great deal,
Speaker 5: the great brands for a lower price and old is
Speaker 5: new again. There you go.
Speaker 2: Okay, Dana Telsea, thank you so much.
Speaker 4: Thank you.
Speaker 2: It's great. And if Paul said, what what Telsey Advisory
Speaker 2: Group did? I remember the first day she came out,
Speaker 2: I was like, yeah, you know whatever.
Speaker 4: Well, it's interesting, Thomas. You know, there was a period
Speaker 4: of time, maybe fifteen years ago where a lot of
Speaker 4: animals left his cell side because they changed the business rules.
Speaker 4: Elliot Spitzer all that with the investment banking took a
Speaker 4: lot of the economics out of the business. Whole lot
Speaker 4: of animals went to the cells, went to set up
Speaker 4: their own shops. I'm talking dozens of ir number one animals.
Speaker 2: Yes, I can.
Speaker 4: Count three or four on my hand that are survived
Speaker 4: and thrived. Dana's one of them surviving, yeah, and and
Speaker 4: and thriving. You know, it's just it's a tough business.
Speaker 2: You should see her do a channel check like in
Speaker 2: your mess. Oh my god. The whole place that the
Speaker 2: staff freezes comes in the door. They just.
Speaker 4: Job their jobs, go to the malls and go to
Speaker 4: store and I don't know, and they do that on
Speaker 4: like that Friday after Thanksgiving.
Speaker 2: It's seventy percent of our economy. Are you bullish on
Speaker 2: retail quickly?
Speaker 3: Yeah?
Speaker 1: I think there's opportunities in retail. You know why singles
Speaker 1: come on see? I mean it definitely is TJX. It's
Speaker 1: going to keep moving higher.
Speaker 2: Dana, thank you so much.
Speaker 4: Just had a nice run.
Speaker 2: This is a joy. It's a three hour conversation with
Speaker 2: Russier Sharma with a book talked about what went wrong
Speaker 2: with capitalism. Can't say enough about it. Hugely readable, like
Speaker 2: all let's work you redefine the commodity super psycle years
Speaker 2: ago holds court at the Rockefeller Foundation. It's been way
Speaker 2: too long. Come back again. We'll do a two segment
Speaker 2: interview to talk about fourteen other things. Megan Decai at
Speaker 2: LSE has a definitive book on the success and failure
Speaker 2: of Marxism called Marxist Revenge. The exploitation is still in
Speaker 2: the air, and there's a lot of people out there
Speaker 2: that feel with capitalism. What went wrong with capitalism is
Speaker 2: an exploitation of so many within society. Is that where
Speaker 2: we are today, back with MAGNETSI and Marx.
Speaker 6: No Tom, I make exactly the opposite point in the book,
Speaker 6: which is the fact that capitalism is no longer being
Speaker 6: allowed to work. What we have today is a very
Speaker 6: distorted form of capitalism. Capitalism at its core is supposed
Speaker 6: to be pro competition, pro churn, pro creative destruction. Instead,
Speaker 6: what we have today is a capitalism that is viewed
Speaker 6: as being pro big business, pro incumbent. And what I
Speaker 6: do in the book is to trace how over the
Speaker 6: last one hundred years capitalism has been distorted systematically, decade
Speaker 6: after decade. So in terms of what we have today
Speaker 6: is in a way of socialized risk for everyone, most
Speaker 6: gallingly for the rich, which Bernie Sanders of course called
Speaker 6: socialism for the rich. But I think that it's socialized
Speaker 6: risk across the spectrum. And so therefore we have a
Speaker 6: very distorted form of capitalism. That's the thrust.
Speaker 2: So if we have Trump Biden, let's assume that Biden
Speaker 2: is going to continue the theme you're talking about, Can
Speaker 2: Trump bring a second term Trump? Can he bring an
Speaker 2: adjustment to a more constructive capitalism?
Speaker 6: Well, Unfortunately, the evidence doesn't say so based on the
Speaker 6: first term, because what did he do in the first term?
Speaker 6: Some of the stuff that I think sounded very good,
Speaker 6: like let's do deregulation in terms of the fact that
Speaker 6: for every two for every regulation that we put in place,
Speaker 6: let's withdraw to instead. By the end of the term,
Speaker 6: Trump had instituted as many regulations as past precedents. As
Speaker 6: I say in the book that one of the most
Speaker 6: telling statistics is that over the last twenty years, America
Speaker 6: has instituted three thousand new regulations a year. That's really
Speaker 6: a huge increase, and it's withdrawn in total only twenty
Speaker 6: regulations over twenty years. So this is a spectacular sort
Speaker 6: of increase in the regulatory environment. But it's the suite
Speaker 6: of government habits that as speak about in the book,
Speaker 6: including the spending as a share of the economy, which
Speaker 6: we all know about, the bailout culture, you know that
Speaker 6: we speak about. So I think that you know, it's
Speaker 6: the suite of government habits, the micromanagement of the business cycle.
Speaker 6: And I think that that is what we need to
Speaker 6: understand that what we have today is a very distorted
Speaker 6: version of capitalism, very different from anything the founders had
Speaker 6: in mind, and very different from even the kind of
Speaker 6: capitalism that America practiced three or four decades ago.
Speaker 4: Talk to us about protectionism, because it seems like the
Speaker 4: US or the West versus China, whether that's it's broader
Speaker 4: than just a technological cold work, seems like it's much
Speaker 4: broader than that. How do you think about how the
Speaker 4: West should deal with China these days?
Speaker 6: Well, in terms of the West is doing what it is,
Speaker 6: which is in terms of raising protectionist barriers and stuff
Speaker 6: like that. But I think that the bigger problem I
Speaker 6: have with the Biden administration is that they're invoking some
Speaker 6: of China's bad habits, including, you know, having an industrial
Speaker 6: policy now, and I feel that this misunderstanding of what's
Speaker 6: succeeded in China, and also the fact that we you know,
Speaker 6: we are once again spending more government money on stuff
Speaker 6: we don't know whether it's going to work or not.
Speaker 6: So we've had this massive stimulus, massive industrial policy. So
Speaker 6: I feel that we know that we still are in
Speaker 6: awe of China at a time when the Chinese growth
Speaker 6: model has faded anyway. So that's what I find is
Speaker 6: the great contradiction of the plan, and instead we are
Speaker 6: wasting billions, if not trillions of dollars on allocating capital.
Speaker 6: Once again, the government's involvement is just increasing with an
Speaker 6: industrial policy. So what we have to as I keep saying,
Speaker 6: is that it's like, whether it's because of China or
Speaker 6: using that like excuse, it's become another reason for the
Speaker 6: government to get more involved in the economy.
Speaker 4: So, you know, you mentioned kind of the deficits in
Speaker 4: it that I've been I'm sixty years old. I've been
Speaker 4: hearing about that my whole life.
Speaker 2: Right, is it a problem now? Is that an issue now? No?
Speaker 6: I think that's a very relevant point. So therefore in
Speaker 6: the book, I don't I show that that's not the
Speaker 6: central problem that I'm focused on, because I know that
Speaker 6: it's a lot like crying wolf, because you know, for
Speaker 6: the last thirty to forty years, there's been so much
Speaker 6: talk about this under Reagan, you know, like we switched
Speaker 6: to deficit financing and through even though he did nothing
Speaker 6: really to cut on spending. So I agree with you
Speaker 6: that this is this book is not just about deficits
Speaker 6: and debt. It's about the suite of government habits. It's
Speaker 6: about the regulatory culture it's about the bailout culture which
Speaker 6: has you know done. It's the micromanagement of the business cycle.
Speaker 6: So it's much more than that. But yes, what's happened
Speaker 6: now with the debt and deficits is that because it's
Speaker 6: thinking is crept in that it doesn't matter. We have
Speaker 6: now taken this to a different level. So now we're
Speaker 6: running deficits of six percent of GDP in the middle
Speaker 6: of a full employment economic recovery.
Speaker 2: I'm going to bring this full circle with your career
Speaker 2: at Morgan Stanley and over to Rockefeller International. On their website,
Speaker 2: they have a memo of nineteen forty seven where the
Speaker 2: Rockefeller family stepped up for India which was basically in
Speaker 2: complete chaos in nineteen forty seven. We've had Rajan on
Speaker 2: from Booth School, Chicago the day after the election in India. Now,
Speaker 2: is this a new India where it's not only Modi
Speaker 2: but Gandhi and the Congress Party can actually make it
Speaker 2: a two party government? Is that what we've learned in
Speaker 2: the Indian election?
Speaker 6: Now, I think in the Indian election, what we've learned,
Speaker 6: Tom is that India is very much a federal nation,
Speaker 6: which is that the states have a lot of power.
Speaker 6: I know we here like to simplify it a bit
Speaker 6: by thinking about it as the center and Modi, but
Speaker 6: even when Modi was in power, I think in India
Speaker 6: the states have a lot of power, just like in
Speaker 6: the United States a lot, and we sort of overplay
Speaker 6: what the influence of the central government is and underappreciate
Speaker 6: what the state governments in India do. So I think
Speaker 6: that in India the big success story which could be
Speaker 6: is one of compares to federalism, but different states of
Speaker 6: competing with each other to get more investment, attract more jobs,
Speaker 6: create more infrastructure. I think that is the real India
Speaker 6: long term story is.
Speaker 2: A Rockefeller International. Are you based in New York?
Speaker 6: Yes, if you can come by more often, I'm very
Speaker 6: happy to come by and speak about it currently. As
Speaker 6: I said, my focus is obviously, you know, like on
Speaker 6: the book, but happy to chat about anything.
Speaker 2: No, of course, for sure. Sharma, thank you so much.
Speaker 2: You did a look at the front pages around the world, Lisa.
Speaker 2: You send me the list, which I've already forgotten because
Speaker 2: I'm in a heat wave. But it was brilliant.
Speaker 4: You know.
Speaker 5: What I like to is that we always have this
Speaker 5: conversation about colleges and the system and how much it costs.
Speaker 5: So this one really So you remember when the University
Speaker 5: of Arts in Philadelphia closed down, left all these kids
Speaker 5: in limbo, which.
Speaker 4: It's been around forever.
Speaker 5: Yeah, like one hundred and fifty years.
Speaker 4: Yeah, okay, I know this one.
Speaker 5: Yeah, So so it left these kids. The problem was
Speaker 5: that a lot of the colleges had already cut off
Speaker 5: admissions for the fall, so these kids were left in limbo.
Speaker 5: But it's not just you Art's I mean, enrollment is
Speaker 5: falling enrollment causing other schools to close their door. But
Speaker 5: this is the point I wanted to point out. This
Speaker 5: is from the State Higher Education Executive Offices Association. They
Speaker 5: say nationally, as many as half of students whose campus
Speaker 5: is closed, they don't go back to school, and that's
Speaker 5: a big problem. The others who do go, they lose
Speaker 5: credits and then they wind up paying more money somewhere
Speaker 5: else because they lost those credits.
Speaker 2: They have to Yeah, they love the credit thing and
Speaker 2: the family can do that they basically had to do with.
Speaker 5: And you pay more, well you're paying more.
Speaker 2: But there's there's a lot of schools that say that's
Speaker 2: not We're not going to take that course. We're not
Speaker 2: going to take that. This is a really important idea
Speaker 2: of Paul, because there's such a focus, particularly on the
Speaker 2: East Coast. Good Morning, East Coast on twelve schools or
Speaker 2: maybe one hundred schools, and there's a zillion other schools
Speaker 2: out They're going, Okay, how are we going to pay
Speaker 2: for the faculty? I know, do we really need athletics.
Speaker 2: There's a lot of that going on.
Speaker 4: And if they don't have an endowment or big enough endowment,
Speaker 4: they're just so dependent upon the tuition that they have.
Speaker 2: Well that's a stick in Europe. The European schools are
Speaker 2: basically broke, and so they want Americans badly. I mean,
Speaker 2: that's I'm speaking.
Speaker 4: You know, you said, you know, kids around here in
Speaker 4: the Tristate are going down to the SEC schools that
Speaker 4: you know, the Alabama's the LSUS because they'll pay full
Speaker 4: out of state tuition and the states love that. So
Speaker 4: that didn't happen in my day.
Speaker 5: But anyway, now, Okay, so companies trying to get workers
Speaker 5: back to the office. We've always been talking about this.
Speaker 5: They've been offering free mails, yoga classes, all these kind
Speaker 5: of things. Parties. Okay, but The new tactic is to
Speaker 5: get workers back to the office by getting rid of
Speaker 5: hot desking. I didn't understand what this was until to
Speaker 5: rend the artic. It's a thing. It's when people share desks,
Speaker 5: so you don't have a perms. You come into work
Speaker 5: with let's say your laptop, and you have to find
Speaker 5: a desk, and it's like this scramble and search for
Speaker 5: a desk. It's sparking some hygiene concerns. People are saying
Speaker 5: they don't like it. They have to wipe everything down.
Speaker 5: They don't have their fancy chair, you know, they have
Speaker 5: to search for a chair. So a lot of companies
Speaker 5: are changing this. They're trying to give workers back that
Speaker 5: permanent desk, you know with the family pictures and all
Speaker 5: that kind of thing, to make them feel like it's
Speaker 5: home again.
Speaker 4: So it's kind of like the anti we work, you know, correct, Yeah, exactly, Okay,
Speaker 4: so that we work. It works for a lot of companies.
Speaker 4: You know a lot of companies that works great for it,
Speaker 4: but for some other companies you need your own space.
Speaker 2: I may I suggest that everybody's overthinking this and it's
Speaker 2: just with the pandemic, there was no commute right and
Speaker 2: that's where they're commute. Yeah, on behalf of all of
Speaker 2: Bloomberg's surveillance. We're commuting pro exactly. We want to commute.
Speaker 2: Good morning, Apple car Play and Android play in the
Speaker 2: Bloomberg Business app. It's free for your commute. We'll make
Speaker 2: your commute safe. Thank and better. Thank you for that promotion, Lisa.
Speaker 5: Next, check all right, football's Christmas games on Netflix. How
Speaker 5: much are these ads going for? Okay? This is according
Speaker 5: to Adweek, five ad packages for pro footballs Christmas games
Speaker 5: on Netflix will each cost at least five million dollars.
Speaker 5: They're categorized by when they air, but each package has
Speaker 5: to include at least eight thirty second ads for each company.
Speaker 5: We're talking about Gatorade, Bryzon, bes A, Microsoft.
Speaker 4: These are super Bowl almost pressure, yeah, because if you.
Speaker 5: Think about it, I mean the Super Bowl. What's seven
Speaker 5: million for a thirty second spot during Super Bowl fifty eight?
Speaker 5: So it's close to it. But they, you know, they
Speaker 5: have a choice. They can go to the Chief Stealers
Speaker 5: game that's set for one pm Eastern and then you
Speaker 5: have the Ravens Texans at four thirty pm. But you're
Speaker 5: just starting to hear about how much people are going
Speaker 5: to pay. Companies are going to pay for these ad
Speaker 5: packages just for Christmas Day. It's going to ruin my
Speaker 5: Christmas Day.
Speaker 2: Okay.
Speaker 5: We used to say I want to watch movies. Now
Speaker 5: I'm stuck watching.
Speaker 2: Does the Detroit Lions play on Christmas Day? Is excuse?
Speaker 4: Thanks Thanksgiving?
Speaker 2: Right? Are they Thanksgiving? No?
Speaker 5: No chief stealers?
Speaker 3: Bringing on the lawn?
Speaker 5: Sex?
Speaker 2: Maybe two games? Okay, you got anything else or that?
Speaker 5: Oh yes, okay, you know we had a guest yesterday.
Speaker 5: He was talking about how our kids wanted to be
Speaker 5: social media influencers. So I that stood out to me.
Speaker 5: And I found an article today that actually says they're
Speaker 5: not making much money, so she can go and show
Speaker 5: her kids. This article from the Wall Street Journal. Platforms
Speaker 5: are given out less money for these influencers. Brands are
Speaker 5: being pickier, TikTok possibly shutting down in twenty twenty five,
Speaker 5: all these things going against it. How much are they
Speaker 5: really making? There's Neo Reach, it's an influencer marketing agency.
Speaker 5: They said last year forty eight percent of these creators
Speaker 5: earned about fifteen thousand or less. That was about it. Yeah,
Speaker 5: and then you had maybe thirteen percent who did like
Speaker 5: one hundred thousand.
Speaker 3: You know.
Speaker 2: So if dad says go get a real job.
Speaker 5: Yes, tell them to go to the Wall Street Journal.
Speaker 5: Read the article, send it to your kids.
Speaker 2: Lisa Mateo, thank you so much. The newspaper report, Lisa Manteo,
Speaker 2: thank you so much. This is the Bloomberg Surveillance Podcast,
Speaker 2: bringing you the best in economics, finance, investment, and international relations.
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